European Session – Dollar’s recovery halted by disappointing US consumer sentiment survey
The euro is on course to end the week higher against the dollar. The concern over Greece has subsided for now even though a compromise on country’s bailout has not been reached yet. Investors await more news out of the Eurogroup meeting that is to be held on Monday.
The euro has held above the key 1.1400 level in the past 2 days. A broadly weaker US dollar as well as some upbeat Eurozone economic data today helped support the single currency. GDP growth in the Eurozone, particularly in Germany, came in stronger – than – expected. Eurozone GDP expanded at 0.3% in the fourth quarter from the previous quarter’s 0.2% expansion. The consensus had expected the same pace of growth as in the third quarter. Germany grew at a 0.7% pace from 0.1% in Q3, beating a 0.1% growth forecast.
The euro hit a 5-day high of 1.1442 early in the European session but the upcoming risk of the Eurogroup meeting next week would likely limit any further gains.
Sterling was one of the best performing major currencies this week, rising to a 1-month high against the dollar and hitting its strongest level in 7 years versus the euro. The Bank of England inflation report on Thursday was more optimistic – than – expected and as a result the pound strengthened. BoE Governor Mark Carney sees inflation recovering to hit the Bank’s 2% target within 2 years’ time. The BoE is still seen as the second most likely major central bank to hike interest rates, after the Federal Reserve.
Cable hit a high of 1.5421 in early US session trading today. A weaker dollar helped support. The greenback has been hit by a series of soft US economic data this week. Yesterday, the retail sales report was disappointing as the headline decline of 0.8% was twice what the market expected. Also jobless claims were higher and rose back above 300,000.
The dollar’s attempted recovery from a low of 118.40 yen to 119.18 was halted after a disappointing University of Michigan consumer sentiment survey today. Forecast to increase slightly from 98.1 to 98.2, the index only rose to 93.6. As a result, the dollar fell against the yen to 118.57.
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